Thursday, 31 May 2007

Neptune Addresses Questions On Clinical Studies & Insider Trading

Neptune Technologies (NTB - TSX V) management today took a head-on approach at two issues that have negatively impacted the stock price over the last several days. NTB published a business update that addressed in detail:

1) Questions that have arisen as key clinical studies have been conducted at JSS Medical Research the President of which is Dr. John Sampalis B.Sc, Hon-B.A, M.Sc, Ph.D., F.A.C.E who is the brother of Dr. Tina Sampalis M.D., Ph.D, Ph.D. Neptune’s V.P., Research/Business & Development and,

2) The "purported" sale by President & CEO Henri Harland of 3.159 million shares.
In the first matter, the news release goes into considerable detail on Dr. John Sampalis' credentials as well as external independent audits conducted on JSS Medical Research to "ensure compliance with government regulation and clinical research ethics.”

On the second point, it was a change in the structure of the Harland family trust that led to a report that he had disposed of his family shares when in fact the shares are now under his children's control. In fact, he has sold no shares and neither has his family.

The problem with the structure of insider reporting in Canada is that this transaction showed up as a "disposition". In our view, the regulators need to dramatically revamp how the electronic system displays information to the public as this is a perfect example of how things can go wrong to the detriment of an insider and the company.

These two issues surfaced within a few days of each other, which led to the stock being hammered down from the high $7 range to the mid $5 range before starting its recovery.
Perception is a critical factor for any business and especially so for a public company in context of the myriad of questions that have been raised about ethics and public conduct over the last half dozen years in particular.

The markets react quickly and with a vengeance when there is any hint of questionable conduct or an insider selling stock in large numbers.

In this case, perception and some level of panic led a number of people to hit the sell button to their disadvantage but to the benefit of others who had cooler heads and took the time to gather information before reacting.

To read the entire news release please click here.